Global Water Shortage Detrimental to Mining Operations

The operations that are the most at risk due to water scarcity are the smaller, less-diversified ones.

A New report shows that global mining companies may start to suffer from international water scarcity. According to Moody’s Investors Service, these companies must act to manage related operational and political risks.

This report, “Global Mining Industry: Water Scarcity to Raise Capex and Operating Costs, Heighten Operational Risks” explored the balance between the needs of communities in close proximity to international mining projects and the amount of water consumed by the projects.

“Mining projects are increasingly competing for limited water resources with local communities and municipalities, while compliance with more stringent environmental rules is adding to the capital expenditure (capex) budgets for new mines,” the report said. “As ore reserves dwindle, mining companies are expanding their operations into increasingly remote and arid regions, necessitating them to find new, innovative ways of managing and procuring water.”  

The scarceness of water Is of great importance to daily mining operations abroad.

“Mining projects frequently require significant amounts of water in order to maintain basic operations,” the report said. “The vast majority of water is used in the processing of ore, but water consumption can increase dramatically when used as part of the extraction or transportation process.”

Additionally, the less water available, the cost of mining increases.

“The financial implications for mining companies are already being felt: project development costs are rising as companies need to invest in alternative water sources, such as desalination facilities, and pipelines to transport water over long distances,” the report said. “Mining companies’ operating costs are also going up as securing, treating and managing water from alternative sources is often energy-intensive and requires significant ongoing maintenance expenditures.”

This issue, however, will have the greatest impact on the smaller mining operations, according to the report.

“Risks arising from water scarcity will not affect all mining companies equally. In general, smaller, less-diversified (and especially single-mine) high-yield mining companies that operate in higher-risk regions, such as South America, are likely to become increasingly exposed to event-risk challenges.”

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